Q: How has Nissan Renault Finance México helped to increase the Nissan-Renault customer base in Mexico over the last 12 years?
A: In 2014, the company managed to attract one million new customers, and by the end of our fiscal year in March 2015, we also achieved 400,000 active contracts. NR Finance supports Nissan, Renault, and Infiniti, which launched in the Mexican market around two years ago. The growth of NR Finance has been thanks, in part, to Nissan’s significant growth over the past couple of years, and also because of the increased sales penetration for each brand. In terms of Mexico’s existing leasing companies, or independent companies that gravitate toward this segment, NR Finance has been able to immediately lead the market. We manage significant fleet volumes, serving both large corporations and SMEs. This sector represents about 15% of our portfolio, and since we launched Nissan Fleet Services this number has been steadily increasing. Nissan Fleet Services was a new alliance initiative in Mexico that helped us to become the leader in fleet financing. We have been working with Nissan in order to develop this initiative, which provides a deeper range of services than just financing and leasing, including insurance, fleet services, and additional support to strengthen brand loyalty. If a customer has any concern regarding the car, its service, repairs, or financing, they can approach our contact center, and we will immediately take care of the situation.
Q: In November 2014, NR Finance held a 25.7% share of the automotive financing market in Mexico. How is this figure evolving?
A: We have completed the fiscal year with a 25% market share, and performed better than in March of 2014. Our market penetration will most likely rise again this year. Today, we are the largest financing company among all banks and other captive and fleet companies that finance vehicles in Mexico. We were able to gain the top position because we were the first to jump into the segments that were not previously offered financing. Customer profiles vary across our brands and we understand that reality. Even though we are NR Finance as a legal entity, our commercial names are Credi Nissan, Renault Servicios Financieros, and Infiniti Financial Services. We customize and adapt all the processes for each brand, taking a different approach and providing different services while recognizing different customer needs. Credi Nissan currently has a 49% penetration rate, Renault Servicios Financieros is close to 70%, giving it the highest penetration rate in the Mexican market for any brand, and Infiniti Financial Services is currently at 56%. Our largest portfolio is Nissan, with 85% of the market share. Another important development is the Nissan semi-new CPO program. As long as a CPO vehicle is purchased from one of the dealership networks, we can provide the same financing tools that are available for new vehicles.
Q: Automotive financing in Mexico saw an 11.3% increase in 2014. What needs to happen to ensure that Mexico reaches 70% of new vehicles sold through financing?
A: The largest financing penetration within the Mexican market was achieved in 2007, before the global financial crisis. Back then, financing represented close to 65% of new vehicle sales in the Mexican market, which is a figure that we are currently closing in on again. Last year, the Mexican market had a 56% participation rate, and at the moment we are at 59%, which shows an upward tendency. The cultural tendencies of previous generations were not favorable toward the financing industry due to a certain level of distrust, so cash transactions were seen more regularly. Nowadays, we are in a more stable market when it comes to interest rates, so approaching people that herald from newer generations is much easier when it comes to financing mechanisms. There is no doubt that we have to develop that emerging market, and we believe that the leasing product will be the breaking point in order to do so. Older generations of Mexican buyers generally view a car as an investment, but new generations understand that you can pay for the usage of a vehicle without necessarily having to own it. When it comes to leasing vehicles, there are tax incentives that can be important for the customer. For example, light commercial vehicles are fully tax deductible, so if a company performs certain commercial activities, it would make sense for them to lease.
Q: What are the biggest challenges of implementing financing services in a country with such a large informal economy?
A: One of the main concerns for a finance company nowadays is the collection process. States and some courts are becoming more aware of the situation, so the reposession processes are faster than they used to be, although they are yet to reach the speed that we would like. Another considerable improvement is that credit bureaus have to share their information. You can find the complete set of information for any given customer, enabling you to obtain an accurate and representative credit history for a potential client. As of now, besides being the largest company in the automotive finance industry, we also have the best past-due loan portfolio. The ratios that we have in comparison with banks and corporations are by far the best in the Mexican market. If you maintain a close relationship with the customer then you can bring them back to the same dealer at the end of their contract and provide them with another solution. We are looking from every angle at how to create this loyalty.
Q: What are the major plans that NR Finance hopes to execute during 2015, and how is the Mexican financing landscape expected to evolve?
A: We now have the largest fleet portfolio, but we still believe that there is a lot of opportunity to continue to expand our services. We see the insurance services field as being another expansion opportunity. We recently teamed up with a new insurance broker that has helped us in the negotiation processes with all available insurance within the Mexican market. This will empower us to provide the best insurance, not only for automotive, but also for life insurance. As such, we are trying to add services in order to give the customers the opportunity to acquire everything they need in the same store.
This year, there has been a transformation regarding nonbank banks in terms of their regulations. When we first started the company, we used to be regulated, a term which is known as Sociedades Financieras de Objeto Limitado (SOFOL), and we were then transformed into a Sociedades Financieras de Objeto Múltiple (SOFOM), which is not regulated. When NR Finance started issuing commercial paper in the Mexican stock exchange, we became a regulated institution once again. As of right now, you have to be regulated. We believe that non-bank banks will be regulated in a similar way to banks, but only regarding the asset side of the industry. Since we do not take deposits from the customers, the liability side of such regulations is not applicable to us, but will be once we start issuing commercial paper. In that regard, if you are not properly organized, and if you do not comply with all of the vassal policies, then the company must be very well capitalized and have strong operational reserves. The players in the market are going to change, and we will inevitably see the introduction of new players.